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tv   [untitled]    November 17, 2014 4:30pm-5:01pm PST

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and there is no possibility of a payment default during the term of the loan and so until if we close in early 2015, we are looking at early 2019 before there is a possibility of a payment default. and as a mentioned before that, before we got to that point, we would have undertaken the process, issue a tax increment and that will return to the bridge financing before returning to the bridge collateral. and so the remaining actions to close, and mtc does have to finalize the approval of the quick claim amendment and as i mentioned that will and should occur next week. the oci, and the city, and the board of supervisors do have to take some legislative actions, and because the city is a party to the option agreement, the board of supervisors has to approve the amendment to the option agreement and because the city board of supervisors
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is also the success or agency in matters represented to the affordable housing, with that on, they have to approve the amendment to the option agreement as well as the subornation of the option that they will be entering into. and those have, been introduced, and i have a schedule on the next slide, but we anticipate that the board will be approving those actions, and at their december 9th meeting. and then, a ocii over site board will have to also, approve the items, and immediately upon the ocii oversight board action will be submitting the ocii related items to the state department of finance to give their approval. and get into the schedule on the next slide. >> and we will be finalizing the bridge financing documents, the documents that you have before you, are in
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substantially final form but there may be minor changes here and there. and the goldman sachs will leave the process of the loan syndication and getting the others to participate and provide portions of the loan and we will be acquiring the interest rate cap and most likely through a competitive bid, and then, of course, financial close. and so, the schedule is slightly changed from the schedule in the staff report, and the board of supervisors is not able to calendar all of the city actions for the november 25th meeting that we had anticipated and so those are now going to be calendared for december 9th. and so, that does push out the schedule a little bit. and ocii is working to schedule an oversight board meeting that same week and so immediately after the board of supervisors acts and so we hope that can be held on december tenth and we will be submitting the item to the state department of finance and we anticipate that it will take about 30 days there after
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and we will be looking at a close in january. and it is some what dependent on how long the state department of finance takes to review the item once we submit, they have five days to either, approve or request additional time and they can request up to 40 additional days to review the item. and so that is the way that the outside close date is closer to the end of january. >> and then, the next fall we will be finalizing the land sales, and requesting a tifia disbursement and repaying the bridge financing, and that concludes my slides and i am happy to answer any questions. >> questions of the directors? >> director reiskin? >> thank you, i know that it has been a tremendous amount of work to get to this point and so congratulations for all of the good work, and that set, and with all of this work, we are talking about a loan that is going to have, or that looks like if all goes well, with a short life, right? and we are closing in january,
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and it could be ready to come out of it by the end of the year? and or even before the end of the year. and so, i guess that the first question, is, what is the actual cash flow need look like during 2015? how much are we going to need and when? and are we going to pull the full, 171? >> if we need to do that? >> the full, 171, would disburse that financial close. and the approximately 30 to 35 million will go to the capitalized interest account and we will pay the fees and the net proceeds will come to tjpa and 124 million going into the land sales and the trust account and then any residual remaining coming into whatever account that tjpa directs to use for the soft cost of the project and it is, under our cash flow planning and it is anticipated that we will use just about all of that net proceeds to at least certificate the contracts if
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not pay the actual invoices over the course of the year but we do need that amount to keep construction moving and certificate the trade packages moving forward. >> okay. and then, given the relatively favorable interest rate, would we potentially delay executing the tifia and paying back this loan? >> it is an interesting question, but the tifia loan interest will be, and it will be repaid from the net tax increment from the pledged revenue and so it is not a capitol cost and to the extent that we were paying the interest from our capitol budget, we will and we would potentially have both of the budget issues on the capitol side. >> and what is the tifia principal plus the interest, do we know what that amount is? >> the principal amount is $171 million and i interest i want to say is about $19 million, is
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that... brian? >> it sounds much too low. >> yeah, i think that i am remembering that from the 2010 approval. >> sorry. i am brian jenkins, with the financial advisor to tjpa, and in terms of the initial tifia interest, it is probably going to be about $30 million. over time, like over the course of the repayment period like over 2050, it is going to be 400 million, in all. like both. >> in total. >> okay, thank you. >> one other tifia related question and in terms of twot conditions, the project being fully funded, and it is possible that we may need to take some action to adjust the budget at this point. before we are ready to execute the tifia loan and does that, how does that timing matter? and how would the federal government be looking at or
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defining the full project funding? >> any budget increase does need to funded in order for us to comply with the goldman sachs, as well as the tifia loan agreement and be able to disperse. >> how are we defining that? >> although the board has taken no action to change the budget or the scope, the current budget and the practice does not include the full scope because it does not include the roof top park and that alone and suggested and based on what is left on the agenda, it does not look like things will term bet ner terms of freing up the space in the budget to conclude the scope in the current board approved budget and which means that the board will have to take the different action, and we know that now and at what point. >> and there are two triggering points that we are waiting for so that we can come back to the board with the revised budget. and as you know, we are working
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with the mayor's office to identify the funding for the elements above the water proofing basically for the above downed elements of the park and we are working on that through the possible sponsor ships or through the (inaudible) once that money is identified, that is the first trigger that will allow us to come to the board and say that we are revising the budget and now we have the park funded and the second trigger that we are working with the mayor's office and meeting with them regularly and letting them know where we are with our bids and where the numbers are coming in at and what we are rewarding and we will be pretty much done by may, or so. june, of 2015, in terms of the award of everything and so we will have a good idea and we will have the opened things up before then and once we know the full universe of what all of the packages are going to cost and we will have the bottom line number and within that time period, is when we will be looking in spring of
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2015 to come back to the board with a revised budget, is that about right, mark? >> yeah. >> and so, that will all have happened and some time in the middle of 2015 well in advance. >> yes. >> and that will, and whatever budget adjustment that we make, assume thating we have revenues, available, that that would satisfy the requirement. >> correct, and the park is actually not an eligible cost under tifia and thus, under this bridge loan and several, this scope is included as you note in the july, 2013, 1.9 budget, but just a side note. >> but in terms of the project being fully funded, right now, one could argue that the project is not fully funded because the current budget does not include the scope that is part of what the board has most recently approved and so we need to... it seems like we would need to reconcile that to meet the tifia project,
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notwithstanding the specific uses of the tifia dollars are, is that my understanding, the loan requirement? >> and i can't speak for tifia of course, and i am not sure if they would, mind, or care if the park were not included in the budget, because they although i am sure that the local fta office will enjoy having a park nearby, they don't view it as a transit use. >> and that is not part of the project. >> technically, yes, but for our purposes to answer your questions, dekt director yes as far as we are concerned we will be coming back with the above elements for the park and we are working with the mayor's office on identifying that funding. >> so we will have a budget adjustment before we are ready to execute the loan, which will meet theirs. >> we have to. >> okay, all right. >> and i, and i noticed that you had the office of the city's office of public finance
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on the selection committee? >> yes, we have been briefing them because nadia sits on the ocii over board as well and we have briefed the mayor's office as well on the real estate klaleral and so they have been involved. >> and the last question is the margin that you said was set or that you spoke of what it would be for the first year, and what is the... >> it is just a half of a percent each year there after. and so it will go up to 2.75, in the second year and there after a. and increase. >> and the interest rate cap, is going to be subject to some competitive process, do we have, without wanting to compromise the process, do you have a sense of what that might and what could we reasonably expect that cap to be. >> we are considering a cap between 50 and 100 basis points
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and we will be working with a consultant who lives and braoegts interest rate caps. >> over three months, which is currently at or below a quarter. >> and so it is not an absolute cap. it is a cap that floats above the (inaudible)? >> it sets a strike price and so if we have a, why don't i let you speak to this. >> no worries. >> it is an absolute cap. >> if it goes above 50 bips and then a company pays and then takes... (inaudible). >> if the global markets collapse and something else happens in the world we will still be firmly capped regardless of what libor does? >> yeah. >> okay, great. >> thank you. >> kind of a related question to that, to that one, and that is, this is it seems to the most open-ended part and that whole cap and everything and
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you have a break down because the capitalized fees of the 32 million there, and if you just figure out the current interest rate, extend it, and that will be about 16, or 16 million over four years, and so, what does the other 16 million come in for? >> actually, director harper that is a good question, and because of the stepped up nature of the margin and the interest is really like 29.3 million when you calculate it all out and the remainer right now is an indicative estimate for what it might cost and we have tried to use the estimates when the comes close and we are able to generate more in proceeds for tjpa. >> it seems that one of the things that we are counting on here is to be able to prepay, essentially and cut it off and
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whoever is giving that cap insurance, to us, is having to figure out on four years, and the libor to go ahead and the gap going up so much every year, do we get any of that back if we prepay? >> if we prepay, we are able to sell the remainder of the cap and the three years of the cap with that provider to someone else in the market. >> bailsed based on the motion. >> there is no possible if we prepay, right? >> there is no obligation, between ourselves and the bank, but there will be an application between the tjpa and the cap provider. >> after we paid off the loan. >> yes, there is no redemption in the cap, it is a four-year instrument. >> why would there be anything left? >> you say that there is an obligation left. >> we have three years of interest rate protection that we can solve. >> that will be valuable in the market to somebody else.
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>> yeah, this is what i don't like about the derivatives you know? and i can understand, why, and i hate to be in this business. but i mean, but we have to be. any other questions? >> i may have missed it and i might need the clarification and i had a hard time following all of the numbers, but in the best case scenario where things are paid off, within a year from closing, what is the best case and you said that the budget could absorb that. and so my first question is, what are the key risk items, and you may have said this, and just articulate again, the risk items of being able to do that? >> and in the probability and then in the second piece is, if you are not able to do that, and you go and you go to the full extent until you have to have the tax increment financing, what is that, what
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is that equate to in terms of what the budget can absorb and what additional funding would be needed? >> sure, i will address your first question, first, about the risk. and so the risk of not being able to pay back is the risk to not be able to draw down on tifia and not areceived, 429 million in land sales which will mean that block 8 or five had not closed as a mentioned things happen and the land scale dates do get closed out from time it time nothing like four years and the bids on those parcels have already been received. and they are locked in to the extent that there is a disposition and a development agreement in place, with block 8,; is that correct??
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>> all of the properties 8, 9, and 5, and disposition and development agreement in various levels of process, and i believe that block 8 is schedule for coming before the ocii commission, relatively, and closed dates are set forth in those agreements with ocii, and so the risk that the land sales would not occur, i would say is relatively small, and then the full funding condition. the recognition of formation of the cfd, and alleviates quite a bit of that risk, and we are able to use, the proceeds towards the phase one, and so, and of course, it is mentioned that we are talking with the
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mayor's office, about and your second question was about the net tax increments take out and i will let, bryant it is going to be a function of hopefully, if the block and the block 8 and five, closed, and then, be able to generate more proceeds and deem out the bridge loan and i think that the more conservative read would be that if we are in that position where we need to go out for the tax increment financing and something, on the development
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schedule is probably and that will be a function of the market and we are in the period of low interest rate and that is not to say what the market will be in 2019. >> we are in the high threes. >> if that is goes the one year. >> that is the full term. >> everything? >> sorry? >> for everything, including the fees, basically, it is below the effective cost for tifia, and which, is and that includes the escrow and everything. because it is 36 million total
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that you have got. as an expense on 171, and i am sort of just putting that out as 5.5. >> it is just how you are characterizing that aspect of it. >> and it seems that you will be out for a long term, and no matter what happens. >> we don't have the credit now, and the easy place and the mature lenders with the tifia loan, which is what we expect as first and expect to use for this tax increment that is going to be very robust when the transbay redevelopment area
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is mature. >> i know that the staff has done a good job and it looks like bringing forth this type of a bridge loan and i am certainty about all of the various steps that we have to go through and this information being fresh, to me. but i do need more clarification would you you like to ask your questions? >> there are so many pieces and there are some questions that i think that ed has asked regarding the budget and the roof top and how that parcel five and eight and all of these that are began aties to this bridge loan and i, you know, i, i hear a lot, but i just need to know a little bit more about each one of these parcels and
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when, they are schedule, and what the expectations are. >> i think that it will be important to start to address that, because director, and if sarah could address this as well. this item, we can't delay this item and sarah can go into the reasons but she can go into any questions that you have on the parcels so the next expected close is block nine in 2015 and a sale price of 43.3 million, and following that blocks eight and five will close in a month of each other and that will close on october one and the block five is sort of the crown ju ill, and 172 million, purchase price which did exceed our estimate and it is an office tower that will be
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adjacent to the transit center and just behind the office building that tjpa offices are in and that is expected to close on september first, 2015. and again, there are exclusive negotiation agreements in place between oci i and the developers for each of those parcels. >> those are in motion and so they approved amending the quick claim agreement yesterday, and it will be forwarded to the full commission next wednesday the spoke with the committee that were there yes and the reason
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that the agreement existed in the first place that the project was not under construction and it sounded like, he was in support of the interest, and it will be with the agreement and if the quick claim if the parcels are not sold when the bridge loan is redeemed and we have been working with the mtc staff on that item and we have been working closely with ocii staff as well and as you can imagine, and the items were approved, at the ocii commission, and the beginning of this month. and they were two pieces of the legislation that were necessary, for the board of supervisors that same day, and we have them briefing the various board members, and kim, and it will go to the board's budget, and finance committee,
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next week as well on the 19th. and the budget analyst offices is going to be releasing a report tomorrow, i believe and we have been working closely with that office, for the information, in that report and the bottom line of that report, as in the draft that we have seen is that there is no fiscal impact to the city. the board is sitting as a committee of the whole for certain pieces of the legislation and that is, and it is calendared for december 9th and we have been getting indications of support, from all of the board members that we have briefed this far. and we have been working with cal tran staff, of course, and just working on the form of documents that will be placed in escrow, and they are similar to the documents that cal
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trans, will place in the escrow when a land sale closes. >> what happens if we get to one of these boards and we don't get a passage? >> well, i have not done, a very good job, briefing them, if we get to that point. i don't anticipate that we would have difficulties of passage of these items, with the wide support that we are getting from the sister agencies and city staff. and deborah? >> yes, i could add director nuru that all of the approvals that sarah just mentioned are conditions to closing on the bridge loan. and so we would not move forward with closing on the bridge loan if we could not line up the approvals. >> and again, nadia has been working with us director from the beginning on all of these documents. >> and i take it that absent some major change to this deal, there is no intention to bring this back to this board in this
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whole time line >> that is correct. if there were changes as they were presented to you today, they would come back in stem but we do not anticipate that that will be the case and all of the major items and minor items of and if i might support, you know, director there and so, if there is, and the city is the board of supervisors do they require our absolute final approval before they entertain it but i am sure that they would
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like to have indication that the action they are taking is or has been approved by the tjpa board. >> all right. >> and i am sure that the submission to the state department of finance will require that final approval. >> and schedule for the 10th, or at least hopefully. >> that is schedule for as soon as the oversight board. >> and the department that could take up to 40 days, is that the one? >> they can. and oci, has brought in the matters to the state department of finance before. and with prebriefings and sending in the materials in advance, they have had some success in not having the department request those additional 40 days and we are actually schedule to go up to sacramento in a couple of weeks to begin that briefing process, and it has already begun, sending them background materials and we will be meeting with them in attorney in a couple of weeks. >> so the reason that we have to go to the department of finance is because of the ocii. >> correct. >> and has to approve and they are having to modify a contract and that has to go in front of the department of finance. >> correct.
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>> okay. >> could you explain how they impact each other and how they cross? >> sure. >> the melaru and the bridge loan are not directly connected. >> they are not a source of repayment for the loan or for tifia and they are a source of full funding for phase one. and so, the district will be formed, and the city will validate the formation, and then, at some point, it could be next fall, once the block six construction has completed. and the city could be in a position to issue bonds. and those bond proceeds, 82.6 percent of those bond proceeds, will come to tjpa for project costs. and it is anticipated what we worked out with the mayor's office that this suggestion of the public finance staff in the controller's office is to use a
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portion of those proceeds to fully fund, phase one and the remainder which is still quite a significant amount, be used for phase two, and in the downtown extension. >> and is the melaru the condition on getting this loan? >> no. we are covenanting in the credit agreement to work with the city, to the district and we cannot control the formation of it but we do covenant in the credit agreement that we will undergo or undertake our best effort to insure that the district is formed. and of course, you approved the executive director voting in favor of formation that was our last meeting. >> and just by way of background, director on the status of the cfd, the city board of supervisors has taken two of the three legislative